Three Tips to Design A Highly-Motivating Sales Compensation Plan

As we begin a new year, many business owners will consider
revamping or creating a new sales compensation plan. It can be
one of your most critical undertakings. The best plans serve as
strong motivation for your sales reps and help you recruit top
producers, which ultimately will boost your bottom line.

Of course, writing a compensation plan is a specialized skill. If
you have the expertise, go for it. If not, consider hiring a
compensation specialist to work with you and offer suggestions
that are tailored to your small business.

Consider these three tips to help you get started:

1. Reward Top Producers
Remember your superstars. Design a plan that recognizes top
producers for sales efforts over and above the average.

As an example, let's say your sales staff has a sales quota of
$100,000 per month and they are paid a commission of 5 percent
per dollar. Most of your reps sell between $103,000 and $110,000
monthly, but your strongest sales rep routinely brings in more
than $170,000 a month. Then, you may want to consider paying 7
percent commission on sales revenue between $101,000 and $150,000
and go a little higher – say 10 percent -- for sales above
$150,001.

The difference in income is as follows:

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The tiered plan will entice a money-motivated superstar to sell
more -- month after month.

2. Make Room for Sales Contests
Generally one to three percent of the amount available for sales
commissions or bonuses should be set aside for contests. When a
sales rep wins a gift certificate to their favorite store, movie
tickets or passes to an amusement park, they feel good about
themselves, their profession and the business they work for. In
my experience, sales representatives typically enjoy longer
tenures with companies that sponsor regular sales contests.

3. Don’t Operate in a Silo
Once the elements of your new plan are in place, ask for guidance
from a business mentor or fellow entrepreneur who has experience
managing a sales staff. They can point out inconsistencies,
inequalities or mistakes in your compensation plan. You also want
to seek feedback from your sales staff; ask them what changes
they would make. You may be surprised at the interesting and
fair-minded suggestions that reps will share with you.

After you received all feedback, make the tweaks and finalize the
plan as quickly as possible. You don’t want sales reps holding
off on closing deals because they’re waiting for the plan to take
effect. Once the compensation plan is official, you’ll be sending
out your sales reps on a clear path for success. Your entire
organization will thank you.